FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2021

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 9 – FAIR VALUE OF FINANCIAL INSTRUMENTS

In determining the fair value of its financial instruments, the Company employs a fair value hierarchy that prioritizes the inputs for the valuation techniques used to measure fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Financial assets and financial liabilities recorded on the Condensed Consolidated Balance Sheets at fair value are categorized based on the reliability of inputs for the valuation techniques as follows:

Level 1 – Financial assets and financial liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities as of the reporting date.

Level 2 – Financial assets and financial liabilities whose values are based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in non-active markets; or valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability as of the reporting date.

Level 3 – Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect the Company’s estimates of the assumptions that market participants would use in valuing the financial assets and financial liabilities as of the reporting date.

The hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Level 1 or Level 2) or unobservable (Level 3). The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability

The following table presents information about the Company’s financial instruments and their estimated fair values, which are measured on a recurring basis, and are allocated among the three levels within the fair value hierarchy as of September 30, 2021, and December 31, 2020:

	Level 1		Level 2		Level 3		Total
September 30, 2021
Financial instruments:
Available-for-sale fixed maturities:
U.S. Treasury securities	$	7,347,117	$	-	$	-	$	7,347,117
Corporate securities		-		47,469,519		-		47,469,519
Agency mortgage-backed securities		-		23,892,554		-		23,892,554
Held-to-maturity fixed securities:
Certificates of deposits		-		548,000				548,000
Equity securities		3,683,154		-		-		3,683,154
Short-term investments		2,661,690		-		-		2,661,690
Total financial instruments at fair value	$	13,691,961	$	71,910,073	$	-	$	85,602,034
December 31, 2020
Financial instruments:
Available-for-sale fixed maturities:
U.S. Treasury securities	$	10,832,181	$	-	$	-	$	10,832,181
Corporate securities		-		46,451,905		-		46,451,905
Agency mortgage-backed securities		-		26,125,608		-		26,125,608
Held-to-maturity fixed securities:
Certificated of deposits		-		798,000				798,000
Equity securities		2,746,706		-		-		2,746,706
Short-term investments		200,000		-		-		200,000
Total financial instruments at fair value	$	13,778,887	$	73,375,513	$	-	$	87,154,400

Fair value measurements are not adjusted for transaction costs. The Company recognizes transfers between levels at either the actual date of the event or a change in circumstances that caused the transfer. The Company did not have any transfers between Levels 1, 2, and 3 of the fair value hierarchy during the three and nine months ended September 30, 2021, and 2020.

As a result of the spread of the ongoing COVID-19, economic uncertainties have arisen which can impact the fair value of investments, day-to-day administration of the business and premium volume. While the Company does not believe it is exposed to substantial risk from coronavirus-related claims under the insurance policies written by Crusader, it is possible that the fair value of its investment portfolio may be adversely affected by the general economic conditions arising from the pandemic.